What’s next? – GOLD, OIL 24.05.18

GOLD

Gold futures were trading up on Thursday, with market participants awaiting fresh economic data following hawkish FOMC minutes.

On the Comex division of the New York Mercantile Exchange, gold futures were up 0.36 percent at $1.294.30 a troy ounce as of 7:30 GMT.

The yellow metal remained flat on Wednesday as the dollar quickly recovered from a slight pullback, but rising geopolitical tensions kept the safe-haven demand alive.

President Donald Trump once again opted for controversy in relation to China and North Korea relations. With the first nation, the President said he was not satisfied with the latest round of negotiations that took place in Washington last week.

Previously, investors digested positive remarks by the US Treasury Secretary about halting a trade war with China and the meaningful advances made in trade relations.

Trump’s blow weighed on the dollar on Wednesday morning, but the currency was able to hold a strong position in the market despite all that.

The US dollar index, which measures the greenback’s strength against a basket of six major competitors, was down 0.11 percent at 93.82 by the time of this writing.

The dollar-denominated metal is sensitive to moves in the US dollar. A stronger greenback makes gold less attractive for holders of foreign currency, reducing demand for safe-havens.

Contributing to the metal’s higher demand was a draw of US bond yields ahead of the release of FOMC May meeting minutes, which ended up being on a hawkish side:

“The staff projection for U.S. economic activity prepared for the May FOMC meeting continued to suggest that the economy was expanding at an above-trend pace.”

On the data front, the US manufacturing PMI for May came in line with expectations at 56.6, while the services PMI outperformed its forecast at 55.7. New home sales for April fell short from estimation at an annualized rate of 662,000 against 680,000 seen.

Ahead in today’s session, attention will be directed to the releases of initial jobless claims at 12:30 GMT and existing home sales at 14:30 GMT.

OIL

Oil prices were down in Asian hours on Thursday, as players continued to weigh a potential increase of production levels by the Organization of the Petroleum Exporting Countries.

The US West Texas Intermediate crude contracts eased 0.33 percent to $71.60 per barrel as of 07:30 GMT. Meanwhile, Brent futures were down 0.43 percent at $79.46 a barrel.

If the United States would impose new sanctions against Iran and Venezuela - both members of OPEC - their crude oil outputs would come under pressure.

These nations have already been keeping their production levels down as part of the output cut agreement promoted by OPEC and a group of external producers led by Russia.

Last month, Venezuela’s oil production fell to 1.5 million barrels, the lowest in decades as the country’s economic crisis is getting worse day by day.

Over the weekend, the country celebrated presidential elections, in which Nicolas Maduro got re-elected despite numerous complaints about anti-constitutional practices and fraud.

In other news, Libya, another OPEC member, reduced its production by 120,000 barrels per day due to an unusually wave of hot weather which caused power disruptions.

OPEC and non-OPEC representatives are expected to meet in Vienna on June 22 to discuss the future of oil production cuts.

Meanwhile in the US, crude supplies were up by 5.8 million barrels in the week ended May 18, against analysts’ expectations for a draw of 1.6 million barrels.

The US Energy Information Administration said gasoline stocks increased by 1.9 million barrels, compared with an expected 1.4 million-barrel drop.

FortFS